We're getting some equity hangover today. I alluded to this as a concern yesterday, namely that it could take a day or two for the terror attack to set in and a little fear to come into the market place.
Ironically, neither gold nor silver are conveying the sentiment, but I feel that's more representative of a move to cash and a wait-and-see attitude, than either a panic out of equities or a panic out of metals.
Both have performed well lately, so neither move is overly concerning yet; however, I would watch the metals closely. This move raises a yellow flag and puts late bulls on notice they better have their position hedged, or strong fortitude to continue forward.
I'd be careful with stock picks here, as momentum dries up a bit. For instance, I like the looks of Infoblox (BLOX) here, but my approach right now is to identify recent breakouts then try to buy their drop near support and look for a bounce.
For instance, BLOX broke out yesterday and saw an additional push this morning. Ideally, we'd get a pullback to maybe $16.50 and then start moving higher again. If it happened in the same day, that would be best, but over two days is fine as well.
I would aim to buy the stock between $16.40 and $16.50. If that's not your game and you are looking for a position, then the alternative is to buy now and use the two-day low as a trailing stop.
Currently, that runs a bit over the 10-day simple moving average of $15.96, so it comes down to your preference of $16.10 versus $15.96. I tend to side with the SMA, especially when they are 1% apart.
Beyond the fade this morning, BLOX does have the setups of a breakout. Price is above recent resistance and we have expansion in the Bollinger Bands.
A volatility expansion here could propel the stock back into the $18.50 area, given the large 9% short float and the seven trading days of average volume needed to cover all those shares.
If we add in the strong momentum push in the RSI, along with a solid trend development as seen in the moving average convergence divergence (MACD) and Full Stochastics, all the pieces start to fall into place.
Add in the volume confirmation in the Chaikan Money Flow (CMF), and BLOX looks like a stock that will outperform the overall market.
The final question comes down to whether you believe the drop today will turn into something more or not. I will stay with the plan of buying a bounce off the $16.40 area, which means I'll end up paying more than $16.40 if that occurs. But my stop will go in around $15.90, so I anticipate only risking 3.5%-4% on this trade, and would cap the position at 3% of a portfolio.